Summary: Inflation’s Influence on USD to BDT—What Really Happens When Prices Surge?
Ever wondered why the exchange rate between the US dollar and Bangladeshi taka sometimes swings so wildly — even when it feels like neither country’s economy is doing anything outrageous? In real-world finance, one of the biggest, trickiest factors is inflation. But how exactly does inflation in the US or Bangladesh shift the USD to BDT rate? I’ll show you, with some real examples, a few honest mistakes, and what the experts say (plus a few gritty regulatory details that most articles skip).
How I Learned Inflation Isn’t Just an Economics Textbook Term
I first got interested in exchange rates back in 2018, when I tried to help a friend send money from the US to her family in Dhaka. We were both shocked when the amount her family received was way lower than she’d calculated. I thought maybe the remittance company took a bigger cut—but after poking around, it turned out the USD to BDT exchange rate had just shifted, almost overnight.
So what happened? The answer was: inflation. But not just in Bangladesh. US inflation played a role too. To get a grip on this, I started tracking inflation rates and exchange rates using the XE.com currency charts and data from the Bangladesh Bank and US Federal Reserve. Here’s what I figured out, and how you can actually use this info if you’re moving money, investing, or just trying to understand global finance.
Step 1: Understanding Inflation—Not Just Price Rises, But Value Shifts
Inflation means prices rise, but in currency markets, it also means the value of money changes. If inflation in Bangladesh is much higher than in the US, each taka buys less. Investors, traders, and even central banks notice this—and that can push the USD/BDT rate up, because people would rather hold dollars than takas.
On the flip side, if the US suddenly battles high inflation (like it did in 2022—see Federal Reserve CPI data), the USD can lose value against other currencies, though often less dramatically because of its global reserve role.
Here’s a screenshot from my tracking spreadsheet (I just use Google Sheets):
In April 2022, US inflation hit 8.5% (highest in 40 years), while Bangladesh was at 6.2%. However, because Bangladesh’s trade deficit and import costs ballooned at the same time, the BDT depreciated faster than you’d expect from inflation alone.
Step 2: The Mechanism—Why Inflation Moves the USD/BDT Rate
The textbook logic is “purchasing power parity” — if inflation is higher in Bangladesh, you need more taka to buy the same stuff, so the exchange rate shifts to reflect that. But in real life, it’s a tangled mess of trade flows, investor psychology, and policy decisions.
For instance, when Bangladesh’s inflation shot up in 2022–2023, importers needed more taka to buy the same dollar-priced goods (like fuel or machinery), which increased demand for dollars. The Bangladesh Bank tried to stabilize things by selling dollars from reserves (see The Daily Star’s coverage), but those reserves aren’t infinite.
Meanwhile, investors notice high inflation and may pull money out of Bangladesh, further weakening the taka. Or, if US inflation is high and the Fed raises rates, dollars become more attractive, and the USD strengthens against BDT.
Step 3: Actual Regulatory and Institutional Backdrop
Here’s where things get interesting: exchange rates aren’t just about the free market. Central banks play a huge role. The Bangladesh Bank uses a managed float, while the Federal Reserve mostly lets the market decide the dollar’s value. WTO principles (see WTO Article XV) limit how much governments can manipulate exchange rates for trade advantage, but within those rules, central banks can intervene a lot.
OECD reports (like OECD Economic Outlook) show that inflation-driven depreciation is faster for currencies with less global demand or weaker institutions — which describes the taka better than the dollar.
Here’s a quick table comparing “verified trade” standards, since much of the exchange rate pressure comes from trade flows:
| Country | Standard Name | Legal Basis | Enforcement Agency |
|---|---|---|---|
| US | Verified Trade Data (CBP/ACE) | 19 CFR § 142.3 | US Customs & Border Protection |
| Bangladesh | Import Verification Certificate | Import Policy Order 2021-24 | Bangladesh Customs |
This matters because if Bangladesh tightens import documentation (say, to control capital flight), it can briefly reduce dollar demand and stabilize the BDT—but only until real inflationary pressures catch up.
Case Study: Dispute Over Free Trade Certification—How It Impacts USD/BDT Flow
Let’s say a Bangladeshi textile exporter claims “verified origin” under a US trade preference program. The US CBP (Customs & Border Protection) suspects documentation isn’t up to snuff and delays payment in dollars. Instantly, that exporter can’t convert as much BDT to USD, lowering demand for dollars (short term, at least).
But if Bangladesh’s inflation remains high and trade partners get nervous, the long-term effect is still a weaker taka. As Dr. Khaled Mahmood, a Dhaka-based trade economist, told me in a recent call: “You can patch the gap with regulations or interventions, but high inflation always finds a way to leak into the currency market.”
How I Use This Info in Real Financial Decisions (with a Few Fails)
After my 2018 blunder, I now check not just the spot exchange rate but also recent inflation reports before sending money. Once, in 2023, I ignored a sudden spike in US inflation, thinking it wouldn’t move the needle for Bangladesh. Wrong! The USD actually got stronger as the Fed hiked rates, so my cousin in Dhaka got more taka than expected. Sometimes you win by accident.
I also follow the Bangladesh Bank’s official forex interventions page. If they’re selling lots of dollars, it’s usually a sign the BDT is under pressure—often because of inflation.
Conclusion: What Should You Actually Do?
Inflation in either the US or Bangladesh can push the USD/BDT rate up or down, but the impact is rarely straightforward. It’s a dance of inflation expectations, trade flows, central bank moves, and sometimes weird regulatory quirks. If you’re sending money, investing, or hedging, always look at inflation rates in both countries, central bank policy announcements, and recent trade data.
If you want to dig deeper, I recommend checking the IMF’s Bangladesh country page and the US Federal Reserve’s policy updates. For trade verification quirks, the WTO Trade Facilitation Agreement is a goldmine.
In the end, even if you mess up (like I did), tracking inflation and exchange rates gives you a fighting chance in a world where nothing stays stable for long. And in finance, that’s as much as anyone can hope for.